Microsoft's Makeover: Nadella Confirmed, Ballmer Vindicated

Microsoft's latest earnings report shows Nadella is the best person to run the company. Both investors and employees look to success as a key metric in leadership competence, and stunning success, in their minds, should mean equally stunning capability. That's critical if Nadella is going to get his people to follow his direction better than they followed his predecessor, Steve Ballmer.

By Rob Enderle
04/28/14 5:03 AM PT

Last week, Microsoft delivered its quarterly report, and it was a big deal. It was CEO Satya Nadella's first real quarter and the Nokia merger was completed.

This is just the beginning of the Microsoft makeover, but two things indicate that in the end, Ballmer finally did what was right for Microsoft in prepping the company for Nadella -- and Nadella was validated as the right choice to lead the firm.

I'll walk you through this and close with my product of the week: the Insteon Home Automation system.

Microsoft Financials

The interesting part of the Microsoft financials is that most of the news out of the divisions was good news. The company's earnings were down, but largely because incentive programs that pushed revenue last year weren't in place this year. Yet it performed better than anyone expected.

Cloud offerings Office 365 and Azure were up, but Azure was the product to watch most closely, because that's the product area Satya Nadella was running before he took over as CEO. That group was in the 100 percent growth category. That's amazing performance -- and given that Azure is likely a good deal of the future for Microsoft, it validated the decision that Nadella was the best person to run Microsoft.

Both investors and employees look to success as a key metric in leadership competence, and stunning success should equal, in their minds, equally stunning capability, which is critical if Nadella is going to get these people to follow his direction better than they followed his predecessor, Steve Ballmer.

Considering that Nadella is still only a few months on the job, these financial results -- including Azure -- are testament to the team Ballmer left for Nadella, showcasing that he left the company better than he found it, and gave Nadella a boost Bill Gates never gave to him.

In short, Ballmer learned from his experience and didn't repeat Gates' mistake, by ensuring that Nadella would hit the ground running rather than floundering, as he had. That's a huge accomplishment, and combined with Nadella's far stronger competence as a software/services subject matter expert, this bodes well for Nadella's Microsoft.

The Nokia Factor

Nokia joined Microsoft last week as a formal part of the company, but it left behind several of its manufacturing components. What that suggests is that going forward, it likely will use more contract manufacturers, as pretty much everyone else does. That should lower Microsoft's costs associated with phones and allow it to better take advantage of some of the economies of scale the other firms benefit from.

What will be interesting is what happens between the Surface and Nokia tablet lines. I actually think the Surface Pro should survive as a stronger laptop/tablet hybrid, while Nokia's 2525 should replace the Surface 2 as the better tablet/laptop.

That's because the panoramic screen the Surface uses, along with the Intel Core processor, works better in laptop mode, making the Surface Pro better at being a laptop, while the iPad-like portrait measurements of the 1520 position it better as a tablet. The ARM (Qualcomm Snapdragon) processor also speaks to that capability.

Nokia Joins Microsoft substantially leaner, and the end result should be a more powerful offering. Its hardware, coupled with a stronger OneDrive, Office and Azure back end, should result in a far better alternative to Android and the iPad.

Apple's financials showcased that the iPad is weakening in the market, which makes the timing right for a newly focused Microsoft effort.

Wrapping Up

Microsoft's strong financials and what it now has with Nokia devices on board makes it far more ready for what's to come than it has been in a decade. While it clearly isn't out of the woods yet, this combination, along with renewed confidence and what appears to be a weakening Apple, should be enough to put it back into the mobile game and better block inroads by corporate competitors.

Last week was a good week for the firm, and after what seems like nearly a decade of bad weeks for Microsoft, that is a big deal.

Product of the Week: Insteon Home Automation

It really looks like home automation is taking off again, with Google buying Nest and a much bigger focus on this segment by a variety of major players. The best system currently in the market, and the one running my home, is
Insteon. I've been using the system for several years now. The company upgraded it with both wireline and wireless capabilities some time ago, and fairly recently implemented a wireless hub that centrally controls most of the modules and uses iOS and Android applications.

The system has modules that will run overhead fans, work outside in the weather, and control both dimming and non-dimming (LED/CFL) lights. Insteon also offers partner kits that will automate door locks and integrate with alarm systems, making its solution one of the most comprehensive -- and from my experience, most reliable -- platforms in the market.

This system is part of what keeps my home safe when I travel, and lets me feel safe when I'm home. And I don't have to get up to turn off lights I've left on at night. I started with X/10 way back in the 80s and was a bit disappointed. Insteon removed that disappointment, and it has become such a core part of my life that it is my product of the week.

Rob Enderle is a TechNewsWorld columnist and the principal analyst for the
Enderle Group, a consultancy that focuses on personal technology products and trends. You can connect with him on
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